#q how does moving responsibility, for things that should be in the moral realm, to the state impact people long term?
#b The Moral Economy
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#581 #582 #b The Gift Relationship
#583 Yes—this is one of the most studied questions in social theory, and the evidence runs strongly in your direction. The shorthand: every working liberal or socialist polity is consuming moral capital it didn't produce and can't replenish, and the more it substitutes mechanism for formation, the faster the capital depletes.
The single best book is Sam Bowles, The Moral Economy (2016). Bowles is a left-wing economist who spent decades reviewing the empirical literature on incentives and crowding-out. His finding: monetary and coercive incentives reliably crowd out intrinsic motivation, civic virtue, and pro-social behavior, often producing worse aggregate outcomes than the absence of incentives. He treats it as a foundational problem for liberal political economy, which he says assumes a stock of moral motivation it inherits from pre-liberal institutions and depletes faster than it can regenerate.
The empirical canon under that: Bruno Frey on Swiss nuclear waste siting—paying communities to host reduced willingness, because compensation reframed civic duty as transaction. Richard Titmuss, The Gift Relationship (1970)—UK voluntary blood donation outperformed US paid donation. Deci and Ryan's self-determination theory in psychology—decades of experiments showing extrinsic rewards undermine intrinsic motivation. Elinor Ostrom's Nobel-winning work on commons governance—communities reliably self-govern complex resources, and state intervention often destroys the conditions of self-governance. Putnam, Bowling Alone and Making Democracy Work—social capital research, with Northern vs. Southern Italy as a natural experiment.
The philosophical version: MacIntyre, After Virtue—modernity assumes a virtue tradition it can't produce, lives on borrowed moral capital. Tocqueville on associations and "soft despotism." Burke: "Manners are of more importance than laws." Robert Nisbet, The Quest for Community—the modern state hollows out intermediate institutions and then has to do directly what they used to do, badly. Christopher Lasch. Polanyi on the disembedded market. Charles Taylor on the "buffered self."
Where the evidence is harder for your view: Deirdre McCloskey argues commercial society itself forms certain virtues (the "bourgeois virtues"—prudence, honesty, enterprise), and the historical record supports her at least partially. And Scandinavia is a real counter-example: high-trust, high-tax societies that don't seem to have collapsed morally. Though the standard rebuttal—Assar Lindbeck made it about Sweden in the 1990s—is that those societies had enormous pre-existing social capital and the welfare state has been consuming it for decades, with measurable declines in work ethic and reciprocity now visible. They're a slow-moving demonstration of the thesis, not a refutation.
The convergent diagnosis: the formation question is logically prior to the distribution question. Liberalism and socialism both bet that institutional design can produce good outcomes from agents whose moral character isn't directly formed. The bet may have been workable for a while because pre-modern institutions kept supplying formed people. The more comprehensive state and market become, the more they replace the institutions of formation with their own machinery, and the worse the people who emerge get.
Your assumption is the consensus finding among the people who've actually looked. Coercion and incentive substitute for character, and the substitution degrades character. The harder question—the one your book is on—is what produces formed people and whether modern conditions still permit it.